Letter to the Senate on the Tax Extenders Bill
June 08, 2010
On behalf of the National Education Association's (NEA) 3.2 million members, we urge the Senate to act quickly to pass tax extender legislation that:
- Provides critical pension funding relief essential to help businesses stave off layoffs
- Provides essential Medicaid funding (FMAP) relief for states to help ameliorate urgent budget crises that continues to weaken the economy
- Extends unemployment and COBRA health benefits to help struggling families; and
- Extends the deduction for educators’ out-of-pocket classroom supply expenses
- Extend the TANF Emergency Fund.
We particularly urge the Senate to include the FMAP and COBRA extensions omitted from the House-passed bill.
- Pension funding relief is essential to help single-employer and multi-employer defined benefit plans deal with losses incurred as a result of the cataclysmic financial market collapse of late 2008 and early 2009. We were very pleased that the House included this relief in H.R. 4213 — the American Jobs, Closing Tax Loopholes, and Preventing Outsourcing Act. This relief will help business by sparing them from impossible financial positions. As a result, it will free up resources and help prevent layoffs that drive up unemployment rates. In particular, we strongly support provisions that would allow single-employer plans to amortize recent market losses over 15 years, and multi-employer plans to amortize the losses over 30 years. No matter how conscientiously a sponsor might have previously funded its defined benefit pension plan, it could not have predicted or been prepared to withstand a 40 percent decline in the market value of the plan’s assets within a nine-month period. The pension relief provisions in H.R. 4213 will save sponsors from having to cover the extraordinary, short-term investment losses with an immediate huge cash contribution.
- An extension of the enhanced federal matching funds for state Medicaid programs (FMAP) is critical for job creation and economic growth and to stave off deeper cuts to education and other priorities. We were very disappointed that the House stripped this urgent relief from its tax extenders bill and hope the Senate will include it in your version. The new fiscal year for states begins on July 1, but the current federal FMAP funding ends in December, the middle of their fiscal year. State budget gaps total $140 billion over the next fiscal year and could cost the economy 900,000 jobs in the near term and more than three million by 2012.
Thirty states have reported that their budgets (proposed or already adopted) assume the six-month FMAP extension. Even states that have adjourned their legislative session can still use the money to reverse cuts and job lay-offs that were planned. No additional legislative action will be required to use the money in most states, since most states assumed the extension. Of the remaining states, some have established contingencies for using the funds if Congress enacts the extension. Others may call a special session or use some other standard budgeting mechanism for using the funds to protect jobs and sustain state services.
- The educator tax deduction recognizes the financial sacrifices made by teachers and paraprofessionals, who often reach into their own pockets to purchase classroom supplies. Studies show that teachers are spending more of their own funds each year to supply their classrooms and purchase essential items such as pencils, glue, scissors, and facial tissues. During the 2005-2006 school year, educators’ out-of-pocket expenses totaled nearly $2,000 — $826 for classroom supplies and $926 for instructional materials on average. The deduction expired at the end of 2009; H.R. 4213 would extend it for an additional two years.
- Extending unemployment benefits and COBRA health benefits through the end of 2010 will help ensure important life-lines for over 6 million workers and their families, and will provide much needed economic stimulus to communities throughout the country. Again, we were disappointed that the House removed the COBRA extension from its bill, leaving millions of families without this essential coverage. We urge the Senate to include the COBRA extension in your tax extenders bill.
- Finally, extending the TANF Emergency Fund (currently scheduled to expire on September 30, 2010) through FY2011 is critical to protect our most vulnerable populations. Without an extension, the 28 states and DC currently operating subsidized jobs programs will start winding down their programs in the next month. These programs have put over 180,000 people back to work at a very low cost per job and have helped businesses hire earlier than they otherwise would have. Many state budgets have assumed the extension of the Emergency Fund; if it is not extended, state budget shortfalls will likely force severe cuts in programs serving the most vulnerable families with children.
Thank you for your consideration of our comments on these very urgent matters.
Director of Government Relations